The Employment Report Sent Out Shock Waves - April 5, 2013

The other shoe has dropped on the employment front. Specifically, one day after the government reported a big jump in weekly jobless claims and just two days after a private-sector payroll report was issued showing many fewer jobs created in March than had been forecast, the Labor Department came out this morning with a dour report on job creation across the country in March.

To wit, Labor reported that non-farm payrolls, which had been generally expected to increase by 200,000 in March, actually rose by a much more pedestrian 88,000.

Importantly, that was the lowest net addition of new jobs since last June, and compared most unfavorably with February's upwardly revised survey reading of 268,000 jobs. Initially, the February total had been estimated at 236,000. Also, January's estimated payroll gain was also upwardly revised, with the increase going from 119,000 to 148,000.

It should be noted, though, that revisions to prior months are given notably less weight than current readings, and the 88,000 new positions added in March was certainly disappointing, and following closely on the heels of the rather disturbing recently issued figures on manufacturing and non-manufacturing, could well be harbingers of a slowing in economic growth in the current quarter.

In addition to the tepid payroll gain, the report also showed a nominal drop, from 7.7% to 7.6%, in the nation's unemployment rate. However, that small downtick was less than meets the eye, as the civilian labor force fell by 456,000 last month, and the labor force participation decreased by 0.2 percentage points, to 63.3 percent.

As to a further breakdown in the report, the Labor Department reported that employment grew in professional and business services and healthcare, but declined in retail trade.

Looking at the overall picture, the data showed that the monthly average of new jobs added over the past 12 months has been 169,000. That is nearly twice the March, 2013 increase, and is certainly not a good sign for the economy as we go forward into 2013. Meanwhile, average hourly earnings were basically unchanged last month, while the average workweek for all employees on private non-farm payrolls, increased by 0.1 hour to 34.6 hours. All together, this was a deeply disturbing economic report and suggests rather definitively that the first quarter, albeit likely a good one for aggregate growth, may have ended on a softer note and that growth could well take a step back in the current quarter.

At the time of this article's writing, the author did not have positions in any of the companies mentioned.